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When Can You Discharge an Unpaid Tax Bill in Bankruptcy?


A question we often get is, “Can I file for bankruptcy to wipe out an unpaid tax bill?” The answer to this question is complicated. While many individual debts can be easily discharged in bankruptcy, there are special rules applicable to taxes.

To explain things as simply as possible, you may be able to discharge a tax debt in Chapter 7 bankruptcy if the following conditions are met:

  • The return associated with the tax was due at least three years ago;
  • You actually filed the tax return at least two years before seeking bankruptcy protection;
  • The tax itself was assessed at least 240 days (roughly 8 months) ago; and
  • You did not commit any tax fraud or evasion in connection with the return.

11th Circuit: Tax May Still Be Discharged Even If Return Was Filed Late

If you have always filed your tax returns on time, then the conditions above are easily met. But what if you filed a return past its due date? Does the fact the return was even “one day late” mean you cannot seek to discharge the associated tax debt in bankruptcy?

The U.S. 11th Circuit Court of Appeals, which has appellate jurisdiction over bankruptcy cases in Florida, recently confronted this issue. The debtor in this case filed for Chapter 7 bankruptcy protection while living here in Florida. Among the debts listed as $11,489 in unpaid state income tax to the Commonwealth of Massachusetts.

The tax in question was associated with the debtor’s 2008 state income tax return. The return’s due date was in April 2009. But the debtor did not actually file the return until November 2009.

After the debtor received a Chapter 7 bankruptcy discharge, the Massachusetts government decided to resume its efforts to collect the $11,489 debt. This prompted the debtor to reopen his bankruptcy case. He asked the court to decide whether or not the prior discharge covered the Massachusetts tax debt.

Massachusetts argued the 2008 tax debt was non-dischargeable. The state’s argument was simple: Since the debtor filed his return late, he did not meet the “applicable filing requirements,” as required by federal bankruptcy law, and therefore never filed a return at all. And as noted above, a tax debt can not be discharged unless a return was filed.

The 11th Circuit disagreed with this line of reasoning. The Court said “applicable filing requirements” do not “unambiguously include[] filing deadlines.” In other words, a “late-filed tax return does not automatically cease having the status of a ‘return’ merely because it was filed late.” The debtor’s unpaid income tax therefore was properly discharged as part of his bankruptcy case.

Speak with a Florida Bankruptcy Lawyer Today

It should be noted that other federal appeals courts that have considered this same issue have ruled differently. Although bankruptcy is a matter of federal law, there remain some differences in how the rules are enforced from state-to-state. That is why it is important to work with an experienced Miami Chapter 7 bankruptcy attorney who understands how the law applies to Florida debtors. Contact the Law Office of Julia Kefalinos today if you need advice or assistance in seeking bankruptcy protection.



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2121 SW 3rd Ave, Suite 600
Miami, Florida 33129

Telephone: 305.676.9545
Fax: 305.856.2715

The Law Office of Julia Kefalinos, Attorney, P.A. is located in Miami, FL and serves clients in and around Miami, Key Biscayne, North Miami Beach, Opa Locka, Hallandale, Hollywood and Broward County.

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

Required legal notice: We are a Debt Relief Agency as is defined in 18 USC Section 101 of the US Bankruptcy Code. We assist people who file for bankruptcy protection.

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